The auditor 317Abbreviated accounts
Small and medium-sized companies can submit abbreviated accounts to the Registrar,
although full accounts will still have to be delivered to the members. (For the definition of
small and medium-sized companies see the previous chapter, p. 281.) Outsiders examining
small company abbreviated accounts would not be able to see how much the directors were
paid, or the amount paid to the auditors, or the amount of the dividend recommended.
Medium-sized companies can file ‘modified’ accounts. These are full accounts except that
certain matters can be omitted.
The offences
Except as regards very small companies, companies will generally need to employ an
accountant to prepare the accounts which must be given to members of the company and
submitted to Companies House. The accountant will be appointed by the directors of the
company. The auditor is not the company accountant, but a different accountant who keeps
an eye on the company’s accounts and accounting procedures. The auditor is appointed by
the members of the company and reports to the members.
The need to have an auditor
Companies which are not small or dormant must have an auditor. A company is dormant
in a period during which no significant accounting transaction occurs.
The auditor is neither a manager nor an employee of the company. Unlike the directors
and the secretary, the auditor is an independent contractor.
Appointment and leaving office
Officers and employees of the company are prohibited from being appointed as the com-
pany auditor. With a few minor exceptions, a person can be appointed as an auditor only if
he is a chartered or certified accountant.
The first auditor of a company is appointed by the directors. Subsequent auditors
are appointed by ordinary resolution of the company members. In private companies the
auditor can be automatically reappointed without a resolution of the members. However,
members holding at least 5 per cent of voting shares can prevent automatic reappointment.
In public companies the auditor must be appointed before the end of the general meeting at
which the accounts are considered. The auditors appointed at the meeting then hold office
until the next such meeting.
An auditor can be removed from office at any time. This can be achieved by an ordinary
resolution of which special (28 days) notice has been given. The auditor must be given
a copy of the resolution, and has the right to compel the company to circulate written
representations of reasonable length to all the members entitled to vote at the meeting. The
auditor also has a right to speak to the meeting. A written resolution cannot therefore be
used to dismiss an auditor. If an auditor is removed the Registrar of Companies must be
informed within 14 days.
An auditor can resign by delivering written notice of the fact to the company’s registered
office. To be effective, the resignation notice must either contain a statement that there are no
circumstances connected with the resignation which ought to be brought to the attention of
the members of the company or the creditors, or it must state what those circumstances are.